To The Moon

🌟🌟🌟ETFs have captured significant market interest with strong inflows in recent years.  There are over 12,000 ETFs listed globally with Total Assets Under Management (AUM) of around USD 13 Trillion, up from USD 10.1 Trillion as at May 2024.

Can you guess which is the biggest ETF market in the world?  If you say it is the US, you are absolutely correct!  In fact there are about 3,500 ETFs listed in the US as at May 2024.  These ETFs account for almost USD 9 Trillion in Assets Under Management.  That is nearly 70% of the global ETF Assets Under Management.  Broad based domestic equity ETFs account for the largest share of the US market at around 35%.

SPDR S&P 500 ETF Trust $SPDR S&P 500 ETF Trust(SPY)$  was the very first ETF launched by State Street Global Advisors in 1993 in response to the 1987 market crash - in famously   known as "Black Monday".  This ETF tracks the S&P500 Index.  It represents 500 of the largest and strongest US companies by market capitalisation.

The Top 10 holdings include Apple Inc, Nvidia, Microsoft, Amazon, Meta Platforms, Broadcom, Alphabet Class A and Class C, Tesla, Berkshire Hathaway and JPMorgan Chase. 

The Top 10 holdings take up 35% weightage of SPY  ETF with the total number of holdings at 504.

Since then SPY ETF has grown to claim the title of the world's largest ETF with Assets Under Management of USD 631 billion.  However its competing ETFs have likewise grown too.  They are Vanguard S&P 500 ETF $Vanguard S&P 500 ETF(VOO)$  and iShares S&P500 ETF $iShares Core S&P 500 ETF(IVV)$ 

Since the start of 2025, VOO began narrowing the gap between SPY with Assets Under Management of USD 626 billion while IVV is not far behind at USD 603 billion. 

SPY, VOO and IVV are the Top 3 most popular S&P 500 ETFs.  Then there is SPDR Portfolio S&P 500 ETF $SPDR Portfolio S&P 500 ETF(SPLG)$  which was launched by State Street Global Advisors in response to the lower fees offered by its competitors.  SPLG is the 4th largest S&P500 ETF with Assets Under Management of USD 59 billion.

Which are the best S&P 500 ETFs to invest in among the 4 choices we have today?

Let's check out the expense ratio.  SPY has an expense ratio of 0.09%.  This is low by most standards but no longer among the lowest we can find.  Its competitors VOO and IVV charge investors just 0.03%.

State Street Global Advisors acknowledge the difference and that is why it offers SPLG which charges just 0.02%!  That is the lowest Expense ratio among all S&P500 ETFs.  State Street Global Advisors want to be a one-stop shop giving investors the best of both worlds with SPY and SPLG on their offering.

Expense ratio is an important part of investing.  The lower the expense ratio, the more money in our pockets.   For the last 10 years, SPY posted an average annual return of 13.01% compared to 13.06% for VOO and IVV.  On a USD 100,000 investment, that translates to a difference of USD 1,900.

Apart from expense ratio, let's check out the dividends these 4 ETFs pay.  All 4 ETFs pay quarterly dividends.  SPY's current dividend yield is 1.3% which is the same for VOO and IVV.  SPLG is slightly better at 1.35%.

In deciding which is a better S&P500 ETF to invest, it comes down to each individual's goals and risk appetite.

Financial institutions and traders will choose SPY due to its liquidity and trading volume.  Investors trade nearly 48 million SPY shares daily on an average compared with less than 7 million for VOO and IVV.

SPY's huge trading volume translates into narrow bid and ask spreads and deep liquidity.  This is far more important than investment fees for large institutions and traders.  Investors who trade options may also prefer SPY because of its use as a reference security for a large pool of options trading.

In addition to the 4 S&P500 ETFs above, there are Leveraged and Inverse ETFs on the S&P500 Index.

Global X offers Direxion Daily S&P500 Bull 2x Leveraged ETF$Direxion Daily S&P 500 Bull 2X Shares(SPUU)$ which provides 2x daily leveraged exposure to the S&P 500.  This is a Bullish Bet on the large cap segment of the US market.  SPUU is designed as a short term tactical instrument and not suitable for a long term hold.  This is due to its daily compounding effects.

Similar to SPUU, Global X also offers Direxion Daily 3x Leveraged ETF $Direxion Daily S&P 500 Bull 3X(SPXL)$  These 2 leveraged ETFs are Bullish Bets on the S&P500 Index, meaning an upwards move in the index is anticipated.  If the index rises in the short term, the ETF returns will be amplified by either 200% or 300% respectively.  Or losses will be amplified by the same amount.

In contrast Global X also offers Direxion 2x Inverse ETF on the S&P500 Index $Direxion Daily S&P 500 Bear 1x Shares(SPDN)$ and 3x inverse ETF $Direxion Daily S&P 500 Bear 3X Shares(SPXS)$ .  These are Bearish Bets, meaning they anticipate a decline in the S&P500 by 200% or 300% respectively.  These inverse ETFs should only be held intraday due to their compounding effects.

With so many types of ETFs to choose from, investors today are spoilt for choice.  However it is important to align the choice with each individual's goals and risk appetite. 

Since my goal is to buy and hold long term, I choose SPLG as it has the lowest expense ratio at just 0.02% among all the S&P500 ETFs.  This puts more money into my pockets in the long term.  With Tiger Brokers' Auto Invest feature, I can dollar cost average SPLG every month, creating a portfolio that will withstand market volatility and harvest the returns with a long term horizon.

Auto Investing is a "Set and Forget" kind of strategy that minimises ad hoc discretionary decisions and maximises gains.

I am reminded of the late Jack Bogle, Founder of the Vanguard Group.  He pioneered passive investing which is a great way to reduce the cost of the investment  process and simplify it for every day investors like me. 

Warren Buffett is an admirer of Jack Bogle for what he did to democratise investing.  He said that a lot of Wall Street is devoted to charging a lot for nothing.  Jack Bogle charged nothing to accomplish a huge amount.

That is the power of ETF, passive investing at its best. 

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